The Reddit Inspired Attack on Shorts Exposed Wall Street Sleaze and Corruption

Link: https://www.thestreet.com/mishtalk/economics/the-reddit-inspired-attack-on-shorts-exposed-wall-street-sleaze-and-corruption

Excerpt:

The big players are overleveraged because the Fed encouraged them. The whole thing is propped up by stimulus and bailouts of consumers and companies alike.

This coordinated short squeeze pushed two hedge funds and Robinhood to the brink. It revealed for all to see how broken the stock market has been..

You know it’s serious when the New York Times puts a stock chart at the top of the page in a Saturday morning edition.

Traders who follow prudent strategies are ridiculed and have zero returns. The Fed is the biggest manipulator out there.

Those traders on Reddit have succeeded in showing how completely broken the stock market is.

The Fed is a big proponent of this through its monetary policy for the wealth effect. It is responsible for reckless leverage, crazy trading strategies, and the huge incentive to manipulate.

Author(s): Mish

Publication Date: 1 February 2021

Publication Site: Mish Talk Global Economics Trend Analysis

Naked Shorting is Illegal: So How the Hell was GameStop 140% Short?

Link: https://www.thestreet.com/mishtalk/economics/naked-shorting-is-illegal-so-how-was-gamestop-140-short

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Excerpt:

It is illegal to be naked short in excess of float except for market makers who have to take the other side of a trade.

It was not the market makers who were naked short. It could be in theory, but not in this case, at least not yet.

Hedge funds wanted to short and they have to borrow stocks to do so.

The hedge funds get those shares from somewhere. Where? The brokerages and the market makers such as Goldman Sachs.

It should be the responsibility of the brokerages and market makes to not let hedge funds get 140% short. But they did, and I believe on purpose.

Since the public cannot be 140% long, except via options, who was effectively long the other 40% of the shares?

The brokerages and the market makers. To get even more shares for themselves, they restricted trading.

So while these Redditt traders did well, the market makers also gained immensely on the meteoric rise. The more the merrier. They screwed the hedge funds big time and purposely so.

A side artifact of points #1 and #2 is when the shorts are all squeezed out the market makers are the only ones who are short.

When that happens, the bids plunge and the market makers cover lower. 

Author(s): Mish

Publication Date: 30 January 2021

Publication Site: Mish Talk Global Economics Trend Analysis

Robinhood, Reddit CEOs to Testify Before Congress on GameStop (GME)

Link: https://www.investopedia.com/robinhood-reddit-ceos-to-testify-in-congress-on-gamestop-gme-5112714

Excerpt:

The Committee on Financial Services of the United States House of Representatives has scheduled a hearing on “recent market volatility involving GameStop [Corporation (GME)] stock and other stocks.” The hearing will be held virtually, starting at 12 noon Eastern Time on Thursday, Feb. 18, 2021. Among those called to testify are Vladimir Tenev, CEO of online trading firm Robinhood Markets, Inc., and Steve Huffman, CEO and co-founder of social media community and online forum site Reddit.1

….

In addition to singling out hedge funds for criticism, it is likely that Robinhood CEO Vladimir Tenev will face hostile questioning about his company’s actions in the GameStop affair. In particular, the committee memorandum notes that payment for order flow (PFOF) has been Robinhood’s chief source of revenue since its inception and that its decision to restrict trading in GameStop and other stocks may have been influenced by its business ties to investment firms that were caught in short squeezes on these stocks.4

The committee memorandum also notes: “In December 2020, the SEC charged Robinhood with making misstatements about the firm’s receipt of payment for order flow and for failing to comply with its duty to ensure that customer trades were executed on the best possible terms. Robinhood’s failure to satisfy its best execution obligations resulted in more than $34 million in aggregate customer losses. Robinhood was censured and agreed to pay $65 million to settle the action.”

Author(s): MARK KOLAKOWSKI

Publication Date: 17 February 2021

Publication Site: Investopedia

GameStop frenzy mastermind Roaring Kitty will testify in Congress on Thursday alongside the Reddit and Robinhood CEOs and two hedge fund managers after amateur traders pushed shares up 1,800% and cost Wall Street $19billion

Link: https://www.dailymail.co.uk/news/article-9259527/YouTube-streamer-Roaring-Kitty-testify-GameStop-alongside-hedge-fund-managers.html?ito=social-twitter_dailymailus

Excerpt:

The YouTube streamer known as Roaring Kitty, who helped drive a surge of interest in GameStop Corp , will testify before a House panel on Thursday alongside top hedge fund managers.

The House Financial Services Committee is examining how a flood of retail trading drove GameStop and other shares to extreme highs, squeezing hedge funds like Melvin Capital that had bet against it.

The witness list was announced on Friday by Representative Maxine Waters and includes Keith Gill, who also goes by Roaring Kitty, Robinhood Chief Executive Vlad Tenev, Citadel CEO Kenneth Griffin, Melvin CEO Gabriel Plotkin and Reddit CEO Steve Huffman.

Author(s): REUTERS and JOSH BOSWELL

Publication Date: 14 February 2021

Publication Site: Daily Mail UK

GameStop Mania Is Focus of Federal Probes Into Possible Manipulation

Link: https://www.wsj.com/articles/gamestop-mania-is-focus-of-federal-probes-into-possible-manipulation-11613066950?mod=djemwhatsnews

Excerpt:

The Justice Department’s fraud section and the San Francisco U.S. attorney’s office have sought information about the activity from brokers and social-media companies that were hubs for the trading frenzy, the people said. Prosecutors have subpoenaed information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other shares, the people said.

GameStop shares surged from about $20 to $483 over a period of two weeks in January. The stock has since fallen to around $50. It was fueled by an army of bullish individual traders exhorting one another on Reddit to buy the shares and squeeze hedge funds that bet the price would fall. Traders who bet stock prices will decline are known as short sellers.

Author(s): Dave Michaels

Publication Date: 11 February 2021

Publication Site: Wall Street Journal

GameStop Mania Reveals Power Shift on Wall Street—and the Pros Are Reeling

Link: https://www.wsj.com/articles/gamestop-mania-reveals-power-shift-on-wall-streetand-the-pros-are-reeling-11611774663?mod=djemwhatsnews

Excerpt:

Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media. Meanwhile, the frenzy of activity is stirring regulatory and legal concerns, as well as the attention of the Biden administration. The White House press secretary said on Wednesday that its economic team, including Treasury Secretary Janet Yellen, is monitoring the situation.

The newbie investors are gathering on platforms such as Reddit, Discord, Facebook and Twitter . They are encouraging each other to pile into stocks, bragging about their gains and, at times, intentionally banding together to intensify losses among professional traders, who protest that social-media hordes are conspiring to move stock prices.

Author(s): Gunjan BanerjiJuliet Chung and Caitlin McCabe

Publication Date: 27 January 2021

Publication Site: Wall Street Journal

Silver is surging but users on WallStreetBets say they’re not behind the rally

Link: https://edition.cnn.com/2021/01/31/investing/silver-price-squeeze-reddit-wallstreetbets/index.html

Excerpt:

Silver futures surged as much as 13% to Monday, touching eight-year highs. That follows a 6% rally last week when some posts on the WallStreetBets group on Reddit called for betting on silver as a way to hurt big banks they believe are artificially suppressing prices.

Meanwhile, retail sites warned customers over the weekend they could not meet skyrocketing demand for silver bars and coins. The Commodity Futures Trading Commission said it is monitoring the silver markets and “remains vigilant in surveilling these markets for fraud and manipulation.” And “#silversqueeze” is trending on Twitter.

However, it’s not clear who the Reddit users are — nor whether their market moves match the claims online.

Author(s): Matt Egan

Publication Date: 2 February 2021

Publication Site: CNN

Buy or sell: GameStop frenzy has Washington teasing action on Reddit vs. Wall Street

Link: https://www.nbcnews.com/politics/politics-news/buy-or-sell-gamestop-frenzy-has-washington-teasing-action-reddit-n1256142

Excerpt:

A number of Democrats and Republicans united in opposition this week to the strict limits imposed by Robinhood and other online stock brokerages on the purchasing of GameStop and other stocks swept up in a Reddit-fueled trading frenzy.

Disparate members of Congress like Alexandria Ocasio-Cortez, D-N.Y., Ro Khanna, D-Calif., Ted Lieu, D-Calif., Ken Buck, R-Colo., and Sens. Pat Toomey, R-Pa. and Ted Cruz, R-Texas, were among those who criticized the move, with many calling for hearings that Democratic leaders say will soon take place in both the House and Senate as what began as an internet movement continues to roil Wall Street.

Lawmakers trained attention on the volatility surrounding GameStop’s stock as several others this week. The stock climbed from $4 only a few months ago to more than $400 this week, juiced by an online movement not dissimilar to others that have broadly altered the political landscape in recent years. At the same time, hedge funds that made large bets on GameStop’s stock cratering — known as “shorting” — began to pile up big losses. Then the brokerages instituted limits, leading to charges of collusion with the larger financial entities facing big losses.

Author(s): Allan Smith

Publication Date: 29 January 2021

Publication Site: NBC News

The Crazy World of Stonks Explained

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Excerpt:

Gamestop’s stock has been on a wild roller coaster ride, rising by roughly 640% from the start of last week to its peak. After Robinhood and other brokers initializing trading restrictions due to the heightened market activity, the stock has since fallen more than 80% to $90 per share.

But the stock’s volatile price action doesn’t come close to telling the story of how this market frenzy began on the Reddit community r/wallstreetbets, the hedge funds that suffered when GameStop share price rose dramatically, and why Robinhood halted trading last week.

Author(s): Niccolo Conte

Publication Date: 2 February 2021

Publication Site: Visual Capitalist

MassMutual Under Investigation Over ‘Roaring Kitty’

Link: https://www.thinkadvisor.com/2021/02/04/state-regulator-probing-roaring-kitty-massmutual/

Excerpt:

Massachusetts’ top securities regulator, William Galvin, is looking into the actions of Keith Patrick Gill, the former MassMutual broker who played a key role in the trading frenzy surrounding video game retailer GameStop and other stock last week.

Gill is the person behind the Roaring Kitty YouTube streams that, combined with a string of posts by Reddit user DeepF***ingValue, drove a sudden increase in GameStop stock trading, slamming hedge funds that had bet against the struggling retailer.

“I can confirm our Securities Division sent an inquiry to MassMutual last Friday asking about Mr. Gill’s status,” a spokesperson for Galvin told ThinkAdvisor on Thursday.

Author(s): Jeff Berman

Publication Date: 4 February 2021

Publication Site: Think Advisor

GameStop stock crashed, but Reddit still wants to send it to the moon. How and what’s next

Link: https://www.cnet.com/personal-finance/gamestop-stock-crashed-but-reddit-still-wants-to-send-it-to-the-moon-how-and-whats-next/

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Excerpt:

When people in the Reddit community r/WallStreetBets began pushing up GameStop’s share price, establishment investors started losing billions and billions of dollars. Since then, GameStop’s shares have been swinging wildly, going from about $17 at the start of the year to $483 last week and then to $90 by the close of Monday’s trading. Shares rose slightly on Tuesday to close at $92.41, which is still down more than 80% from their highs last week.

Author(s): Ian Sherr

Publication Date: 4 February 2021

Publication Site: Cnet

GameStop insurgency is just the latest rebellion against ‘the Big Guys’

Link: https://nypost.com/2021/01/28/gamestop-insurgency-just-latest-rebellion-against-the-big-guys/

Excerpt:

Writing for The Post this week, Charles Gasparino explained why the little guys got together to buy GameStop: “Mostly, they’re out to hurt the big guys.”

The Big Guys’ problem is that nobody likes them much. From Silicon Valley to Wall Street, they’re deeply unpopular with ordinary Americans, on both the left and the right, resentment they’ve stoked with selfishness, arrogance and condescension. Their solution to this unpopularity has been to use their control over online platforms, and their influence over the government, to silence their critics.

But they can’t stop the signal. No sooner did the tech giants collude to shut down Twitter alternative Parler than a new revolt sprang up somewhere else entirely among stock traders on Reddit. What will it be next? Truck drivers refusing to deliver food to Silicon Valley? Plumbers boycotting “woke” executives? It’ll probably be something cleverer and less foreseeable than that, but it’ll be something. The more the techno-elite tightens its grip, the more Americans will slip through its fingers.

Author(s): Glenn H. Reynolds

Publication Date: 28 January 2021

Publication Site: NY Post